Oil and gas decisions

In the wake of the stark duplicity and opaqueness that has characterised the APNU+AFC government’s handling of the nascent oil and gas sector, the public has been awaiting a clear sign from the administration that transparency and full engagement with all stakeholders will be its mantra. That has clearly not been the case.

In an editorial on December 11, 2017 in the aftermath of the unmasking of the hidden signing bonus, Stabroek News stated the following:

“President Granger must immediately accept responsibility for his government’s deceiving of the public on the signing bonus from ExxonMobil which was transmitted to the administration sometime in 2016. Given all of the sanctimonious rhetoric that has flowed since 2015 from his administration and experts hired by it on the transparency that will accompany the new oil economy, the secrecy around the signing bonus is reprehensible and will do lasting damage. Trust in the administration’s handling of negotiations with multinational behemoths like ExxonMobil has been broken.  Unvarnished and understandable scepticism will greet all future pronouncements on agreements of this sort and the government will be weakened in its negotiating stance”.

Not much has changed since these words were written, except that the oil and gas portfolio was removed from Minister Trotman earlier this year and ensconced in the Department of Energy (DoE) under the Ministry of the Presidency. Having been told that the DoE would be the supremo in the sector, President Granger recently said that     in due course a ministry will be running the oil and gas sector raising further questions about why it was really removed from the Natural Resources Ministry and if the government has a clear idea of the way ahead.

None of the steps taken recently by the government in the sector engender confidence. After months of questions about how it would forensically examine the US$460m pre-contract claim by ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), the government now appears to have decided that the task will be undertaken by the Guyana Revenue Authority (GRA). Serious questions were raised in a letter in yesterday’s Sunday Stabroek by chartered accountant and commentator Christopher Ram about whether the GRA could legally do this, whether it wouldn’t pose a conflict of interest ranged against the GRA’s traditional tax auditing responsibilities and how the state audit office had been sidelined in the process. Another chartered accountant, Floyd Haynes in a separate latter adverted to the specialist areas that are required to be audited and stressed the need for a multi-disciplinary team to undertake the task. It is unlikely that the GRA has such. The government must now publicise exactly what it has delegated the GRA to do and what informed its thinking in the assigning of this agency.

The selection of the Head of the DoE, Dr Mark Bynoe at the beginning of August was also completely lacking in transparency and, based on a statement by former advisor to the President, Dr Jan Mangal, the choice transgressed a commitment by the government for a global search for the best candidate for such an agency. Dr Bynoe, with no known experience in the oil and gas sector,  was handpicked by President Granger on grounds that the public is unware of.

Considering that Dr Bynoe had no experience in oil and gas, the government scrambled to hire someone who might have more suitable credentials. On August 28, the government announced the appointment of a Matthew Wilks, described as an experienced oil and gas business developer and negotiator, as Oil and Gas Adviser in the Department of Energy within the Ministry of the Presidency. Again, there was no word on how Mr Wilks was selected and whether he and his background had been subjected to rigorous scrutiny.

Further compounding the government’s poor handling of the sector was the release of a paper on the proposed Natural Resources Fund which put the Ministry of Finance front and centre of all decision-making in this most crucial component of the country’s oil future. Those who constructed the model clearly had no real understanding of the country’s history, the entrenched lack of trust for politicians and the insidious corruption that has gripped the country for decades. The model is not workable and reduces stakeholding in the oil sector to a small class in the executive and political realms; completely shortsighted and further grounds to resist the many consultants decamping to Guyana under the rubric of multilateral financial institutions to “advise” the country about its oil future.

The PNCR-led government appears to want complete control over the bases of the impending oil economy and is moving inexorably on a number of fronts. This must be resisted. The oil wealth of the country must be managed by a much broader group of stakeholders.

In the meanwhile, the government is still to present a final position on local content policy and how to ensure that the goods and services attendant to the oil industry spur growth of jobs here and income for Guyanese. This should have been one of the urgent priorities of the state but appears to be completely mired in bureaucracy and studies. In the meanwhile, ExxonMobil’s contractors continue to advertise for goods and services but there is no sign that any government department or the private sector for that matter has mobilised to ensure that as high a percentage as possible of these positions and services are filled here.

There has also been no word on whether the government has addressed its mind to a depletion policy for oil and begun to construct such.

Underlying all of the failures of the government in this sector is its unwillingness to seek an improvement in the rate of royalty which was set at 2% in its clandestine negotiations in 2016 with ExxonMobil. The stream of oil discoveries since the Liza-1 well magnifies the folly of the 2016 Production Sharing Agreement which President Granger has to take full responsibility for.

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